The
availability of well-developed markets for agricultural output is crucial for
boosting commercialisation and reducing poverty in rural sub-Saharan Africa. Oil
palm, Ghana’s most important traditional export crop besides cocoa is widely
produced in south-western Ghana, particularly the Ahanta West and Mpohor (Wassa
East) districts. Consequently, various oil palm output marketing arrangements
have emerged over the years in these areas. Although oil palm production in
Ghana started in the early 1850s, it is not until 1976 that a large scale oil
palm processor, Benso Oil Palm Plantation Ltd (BOPP), emerged and started large
scale oil palm processing in the oil palm-rich enclave of south-western Ghana.[1] In
1988, Norpalm Ghana Ltd (NGL) entered the south-western Ghana oil palm market
as one of the largest oil palm buying companies. BOPP and NGL run their own oil
palm plantations, employing hundreds of contract and out-grower farmers. These
companies operated as the “big two” oil palm buying companies in the area until
2013, when Building Businesses on Values, Integrity and Dignity (B-BOVID) – a
medium-scale palm fruit processor – appeared on the scene, proclaiming
farmer-inclusiveness in the oil palm industry, promising farmers various
incentives in the aim to capture a greater share of the oil palm output market
and improve farmer welfare. B-BOVID became a third force in the oil palm output
market in the region. A careful observation of the operations of these oil palm
marketing companies in relation to oil palm farmers elicits a key research
question: does the distribution of farmers among these oil pam output buyers
differ, and are there differences with respect to their level of
commercialisation and welfare? We conducted a survey of about 700 households in
20 communities in the Ahanta West and Mpohor (Wassa East) districts. Apart from
farmers who sell their output to the three companies (NGL, BOPP and B-BOVID) we
identified ‘independent’ farmers who sell to the open market or process their
own oil palm. Our study therefore involves these four oil palm
commercialisation (OPC) models.

There is
high participation in both input and output markets by farm households. For
instance, 67 % of farm households used some hired labour, and 86 % of the value
of crops produced were sold, on average. But does the rate of commercialisation
differ across the marketing channels? Farmers who engaged with the “big two”
companies (BOPP and NGL) were more commercialised on the input (fertiliser and
hired labour) side, with BOPP being slightly more commercialised than NGL. Overall,
independent farmers were the least commercialised on the input side of the
market.

The story is similar on the output side of the market. Using the household commercialisation index (HCI), which measures the ratio of the total value of crops sold to the total value of crops produced by the household, the “big-two” farmers are more commercialised than the other two groups. Here again, commercialisation rates are lowest among independent farmers (see Figure 1).

What are the associated welfare outcomes? Returns to farm labour is also highest for farmers who engaged with the “big two”, compared to B-BOVID and independent farmers. However, BOPP associated farm households were again better off than those associated with NGL (See Figure 2). Returns to labour (on- and off-farm) per worker varied widely across the sales arrangements, with BOPP and NGL associated farm households reporting the highest average returns (about US$832 and US$554, respectively); independent and B-BOVID households reported US$327 and US$296, respectively.

Policies
promoting agricultural commercialisation are premised on their expected
positive association with household welfare. As one would expect based on the
outcomes above, per capita net income is highest for farm households who sold
their output through the “big two” (US$1,586 for BOPP and US$1,081 for NGL);
per capita net income is almost identical for B-BOVID and the independent arrangements
– about US$952 and US$953, respectively. Based on the multidimensional poverty
indicator (MPI), BOPP-associated households were the least deprived (41 %)
compared with households associated with the other output sales arrangements,
of which all have an identical deprivation rate. Overall, therefore, BOPP-associated
farm households are better off on all the welfare measures, as well as having
the highest rates of input and output commercialisation.

In conclusion, the assessment of oil palm farmers’ socio-economic outcomes in south-western Ghana reveals that among the four (4) oil palm output sales arrangements, farmers associated with BOPP have better outcomes. This prompts certain critical questions. What is it about the BOPP-model that yields these outcomes? Could it be the number of years of its existence, scale of operation, or just a coincidence? Watch this space for the next blog discussing the unique attributes and operations of the BOPP-model that could potentially contribute to these observed outcomes.

About Future Agricultures

The Future Agricultures Consortium is an Africa-based alliance of research organisations seeking to provide timely, high-quality and independent information and advice to improve agricultural policy and practice in Africa.